A few friends
have asked my way of buying and selling shares. It means my strategy in
selection of shares for buying and selling. Thinking that it may help to some
new friends I have compiled, edited and posted by responses below.
1. From 2008 to
2011, I was governed by gut feelings, market buzzes, seniors' advice and reading
conventional indicators like P/E Ratio, EPS, Net Worth, etc. During that
period, I had huge loss not only because my orthodox investment strategy, but
primarily because the market nosedived.
2. From 2011
onward, I started to focus on companies. I studied about composition of
companies' board/management, history, performance including earnings, reserves,
dividends, etc, companies' standing in their respective business sector, court
cases, growth prospect etc. This changed focus influenced me to move toward
investment from trading. However, till 2015, I was like a mixed breed
practicing both - investment and trading. However, since 2016, I moved to
investment with exceptional acts of trading. Therefore, my way of buying and
selling may not be that fretful for friends in trading field.
3. I have tried
to identify my areas of strengths in understanding business of different
sectors. Lately, I realized that I am novice in hydropower, hotel and
manufacturing. So, I stayed out of them. NTC and HIDCL as mentioned "others",
I thought are non-movers. So, I did not keep them in my list of preference. I
considered MFIs quite risky and so, though occasionally, I traded on MFIs but
did not invest. Now, I had just commercial banks, development banks (excluding
MFIs), finance companies and insurance. Hence, I concentrated on BFIs and
insurance.
4. I had done
quite extensive exercise on safe and secure companies, share retention rate of
companies/ changing hands faster companies, price range-wise classification of
companies etc. This way, I had selected 52 companies in the beginning and after
more study of select companies, I have narrowed down to 30. I have invested in
9-10 companies at a time among these 30 companies. I will reassess these
companies vs. rest of the companies after the companies will declare dividend.
This exercise I have planned for January/February.
5. I
continuously follow a good company with high probability of growth till it reaches
to silent phase. When most of the people start showing doubt and start staying
away, and at the same time the price comes down, I buy. And, when that becomes
a hot potato, I sell. This is primarily a Buffet Formula but bringing it into
practice is challenging.
6. For trading,
we should have a good understanding of trend and for this technical analysis
may help a lot. For investment, we need to understand a company and fundamental
analysis may help us. I am not so good in technical analysis, and hence,
naturally I go through fundamental analysis and I moved primarily to investing.
7. After all analysis,
cautions and validation, profit/ loss in share market are Siamese twins. I have
seen big losses and big gains as well. Hence, we should take risk according to
our situations. For the risk avoiders and the Hara-kiri share market is not the
right place, I believe. Also, patience pays here.
Note: I have
posted long time ago some of my exercises on companies in my blogs – www.sharenepalcomments.wordpress.com
and www.stocksofnepal.blogspot.com.
Though the exercises have not been updated in today's context, they may
provided historical perspectives.
No comments:
Post a Comment